PROJ02063

• Contract/PO #: C150234
• Contractor Name: Headgate 396 Lateral Corporation
• Contract Type: Loan
• Water District: 72
• County: Mesa
• Loan Projects - Doc Type: Feasibility Study

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Funding Agreement

This Agreement is made this 9th day of October 2006, between The Headgate
396 Lateral Corporation, a Colorado corporation, and the undersigned members
of the Corporation, (the Funding Members).

Whereas, The Bylaws of the corporation require that "The Corporation may not
undertake additions and/or improvements to the Ditch without approval in
advance by the Membership. The Membership shall be presented with a written
resolution defining the addition and/or improvement to be voted on and also
presented with a Funding Agreement signed by the Member or Members that
agree to pay for the addition and/or improvement, if approved by the
Membership. The Funding Agreement shall set forth details of the proposed
work, the estimated cost of the work, the method for sharing the cost, including
any overruns that may occur, and the proposed schedule for conduct of the work
by the Corporation, and

Whereas, The Natural Resource Conservation Service of the US Department of
Agriculture had included the Ditch in the EQIP Program and the Corporation and
NRCS have entered into a Conservation Program Application/Contract (the
Contract) under which the company could become eligible for funding and other
assistance to upgrade the Ditch to a pipeline, and

Whereas, The undersigned Funding Members desire that the Corporation
accept the NRCS proposal for the pipeline to be installed in the Ditch foe delivery
of irrigation water to the Members of the Corporation and receive the design
assistance and $96,019.11 in funding offered by NRCS, and

Whereas, The Colorado Water Conservation Board (the CWCB) has committed
to make a loan to the Corporation to finance the Corporation's share of cost for
the pipeline to be installed by NRCS, and

Whereas, The Funding Members desire that the Corporation of the mutual
covenants contained herein, the Corporation and the below signed Funding
Members agree as follows:

1. The Additionsllmprovements to the Ditch-The Additionsllmprovements
proposed for the Ditch are the installation of the pipeline and related
appurtenances and improvements defined in the Contract, which is attached
hereto as Exhibit A and made a part of this Agreement.

2. The Loan-The Loan from CWCB is defined by the feasibility study, the
loan application and the Loan Contract, which includes the Promissory Note, the
Resolutions, the Security Agreement, and the loan commitment; all attached
hereto as Exhibit B and made a part of this Agreement.